Having concluded their probe into the bankrupt crypto lender Celsius, the US Commodities Futures Trading Commission (CFTC) has found grounds to file a case against Celsius and Alex Mashinsky in federal court before the end of July.
The firm and its former CEO Alex Mashinsky broke US laws before filing for bankruptcy, Bloomberg reported on Wednesday.
CFTC lawyers found that the lender misled investors and failed to register with the regulator, and Mashinsky himself also violated regulations, said people familiar with the matter. If the majority of commissioners agree with investigators, the CFTC may file a case against the crypto lender in court by the end of the month.
The investigators’ conclusion is congruent with the independent examiner’s report released in February, which found damning revelations that date back to at least 2020. In the 476-page document, the examiner found that Celsius insiders knew about illegal activities, and some employees withdrew large chunks of tokens before the firm’s eventual collapse.
The revelations included misuse of client funds to pump the $CEL token, withdrawal of customer funds and a fake rewards policy, among other malpractices.
The US Securities and Exchange Commission (SEC) and federal prosecutors are also probing the lender, according to bankruptcy filings from May 2022.
In June, a group of Celsius creditors accused the market maker Wintermute of aiding Celsius with wash trading activity. The lawsuit states that Wintermute helped Mashinsky artificially inflate the CEL token’s value in May 2022 during the Terra-Luna collapse.
Celsius filed for Chapter 11 bankruptcy in July 2022 with just $167 million in liquidity at the time. In May, a consortium by the name of Fahrenheit won a bid to acquire the company’s assets for $2 billion, and filed a bankruptcy-resolution plan of action that was met with significant push-back from creditors.
On June 30, a New York court agreed that Celsius could begin converting assets to Bitcoin and ether starting July 1.